ERCG begins its ABC leadership interview series with David Wiers, President of Satori Energy. We sat down with David and discussed several topics, including --
ERCG: Can you provide some background on Satori Energy - how long you've been in business, customer segments served, geographic coverage, etc?
Wiers: Satori began serving clients in 2006; I personally was lucky to fall into the industry right as Illinois was deregulating in 2000 and have been fortunate that clients have made the choice to continue working with us over the years. Satori and its affiliate companies are headquartered in Chicago, with satellite operations in Upstate New York, Southern Illinois, and Texas. Satori serves clients in almost every deregulated market in the US and we have grown our customer count to over 50,000 end-use customers. I have made a conscious effort to diversify Satori’s client base and we continue to serve traditional C&I clients, but we also serve some residential, governmental, and retail clients.
You founded TEPA in Texas and then founded ILEPA in Illinois. Please explain the importance of the ABC organizations.
In 2004 I was spending a few weeks a month in Texas and was really focused on growing the Texas market. Remember that these were the days where the lines of communication between ABCs were really non-existent. There were rumblings from certain suppliers regarding a desire for more ABC oversight from the PUCT. I talked with a few people and we clearly thought this would not be good for the industry. So, TEPA was really founded with the intent to have a common voice among the ABC community and ensure ABCs could continue to operate in the marketplace. ILEPA was formed in 2007 when one supplier was trying to make it very difficult to operate as an ABC in Illinois – we took the same lessons learned in Texas and applied them to Illinois. These ABC organizations are important in the marketplace because they provide a forum – a forum for customers to bring complaints, a forum for suppliers to address issues, and a forum to ensure ABCs are operating with at least a minimum level of competence and expertise. I’m proud to see how these ABC organizations have continued to grow as well as expand with TEPA Northeast and EPO in Ohio.
What qualities do you look for in an ideal supplier partner?
Satori wants to partner with suppliers that first and foremost value ABCs and are committed to the ABC channel. Next we look for suppliers which have a responsive indirect sales team and treat us like a client. I’m a big advocate of aligning relationships and incentives; those suppliers that will advocate for us and benefit when Satori succeeds prove to have the deepest and best relationships. Of course we expect that suppliers will have billing accuracy, good customer service, financial strength and great back-office precision.
There has been a lot of discussion lately on non-commodity offerings - how do you see Satori playing in this market (EE, DR, DG)?
Through our purchase of EnergyNext, Inc. in New York, we have ventured into this space a bit with micro-Hydro projects and Solar programs. We will continue to search for ways to create value for customers, but will always remember our core business. We do procurement very well and I will not sacrifice that solely to add another product line or more revenue.
Satori has been a leader in M&A of ABCs over the past 18 months. What drives your decision to acquire an ABC? Geographic of customer segment expansion opportunities, back-office support of target customer book, etc?
We believe that Satori has a competitive advantage in our back-office and internal systems – our cost-to-serve is arguably the most efficient in the industry. That said, we are always looking for opportunities to create value for end-use customers and most of the acquisitions that we have closed on result in immediate opportunities for the customers. If the acquisition is a “stock deal” like EnergyNext, Inc then culture is one of the most important items; we have built a fantastic culture and that will continue. If the acquisition is an “asset deal” then culture is less important because we are just taking the clients. We are still open to evaluating additional acquisitions if they meet our internal objectives.
Ameren in IL - historically, capacity was pretty cheap but recently it shot up. FERC issued a ruling on Dec 31 ordering MISO to revise its auction rules for the upcoming April auction. Have the challenges surrounding the capacity market in MISO Zone 4 affected your ability to do business in downstate IL?
The difference between Zone 4 and the other MISO zones has raised some questions. However, most of our clients in Ameren are long-standing clients which we keep updated regularly on market conditions. With the uncertainty of the capacity piece in Ameren, we’ve been encouraging our clients to do shorter-term deals. The process for acquiring new clients in Ameren has become harder.
What are your recommendations for suppliers looking to hedge their risk in Ameren?
There are many ways which suppliers can hedge their risks. One way which went out of style but may be coming back into vogue is owning assets in the ground. With the ability to hedge energy, capacity and RPS some of the micro-Hydro projects we are working on have interest to suppliers. Additionally, the value proposition is higher and cost basis is significantly lower than a traditional 100 MW+ power plant. This is a differentiator among some suppliers as many do not own assets in the ground.
What other regional risks or opportunities are you seeing on the horizon?
Certainly the low commodity environment has created purchasing opportunities for customers. With the increasing capacity costs in PJM (addition of Capacity Performance) along with the NITS adjustments, I believe that customers will begin asking more questions surrounding their procurement process. Unless ABCs are fully explaining and disclosing what the risks are to the end-use customers, there will be more surprises for customers when many will see the Capacity Performance change in law beginning this June. Based on the recent transmission (NITS) adjustments, this capacity (CP) adjustment, and the increasing cost of capacity (increasing the value of DR programs) we may see more customers opting for “energy only” products or pass-through products in the future.
For more information, contact Young Kim, Principal at ERCG
Phone: (617) 903-0877
ERCG sat down with leaders of dozens of ABC firms to get their insights on the market and how to build a successful business